Market News Oil prices are easy to rise and hard to fall! Saudi, UAE production increase is modest, summer driving season hits demand to boost demand
Oil prices are easy to rise and hard to fall! Saudi, UAE production increase is modest, summer driving season hits demand to boost demand
Saudi Arabia and the United Arab Emirates are willing to increase production, but only slightly. Many experts believe that the risk of higher crude oil prices is greater. Increasing demand in Asia and the imminent start of the driving season in the West have been offset by a gradual recovery in refining capacity.
2022-06-09
7189
While crude oil prices haven't reached all-time highs, gasoline prices keep breaking records. Analysts believe that oil prices can continue to rise, but high prices may prompt consumers to accelerate the use of electric vehicles.
According to market analyst Stuart Burns, there are many reasons for the rise in natural gas prices. Lack of natural gas storage is one factor. Another reason is Europe's overreliance on formerly cheap Russian oil and gas. Compounding the problem, politicians are eager to shut down nuclear and fossil fuel production. This applies not only to crude oil and natural gas, but also to refined products. These factors combine to create a perfect storm that has driven gasoline prices to all-time highs.
In fact, gasoline prices have continued to soar even as crude oil prices are significantly lower than they have been in the past 10 years. As the FT observed, Brent reached $123 a barrel last week, well below its 2008 peak of $147.50. Record diesel and gasoline prices have a lot to do with the increase in refining premiums. Tight refinery capacity is the main reason behind the surge in these oil prices during the maintenance season. This seems to suggest that these premiums will ease once refineries return to full production, but that's no guarantee. Consumption in Asia, for example, has been severely restricted due to widespread lockdowns this year. However, demand in the U.S. and Europe will pick up as consumption picks up in the summer as coronavirus lockdowns ease.
Reports last week that Saudi Arabia and the United Arab Emirates will increase crude production ahead of the current September assessment date pushed prices slightly lower. Until news comes that July and August production may only increase by 250,000 barrels per day. Of course, this extra supply is useful, but not enough to shake up the market . Officially, the Saudis are reluctant to increase production further because they want to keep some spare capacity in case oil prices rise further. Basically, Russia claims they need to be "prepared" for a potential increase in demand, or a further reduction in Russian supply, or both.
Many experts believe that the risk of higher crude oil prices is greater. For now, the gradual recovery of refining capacity is being offset by increased demand from Asia and the upcoming driving season in Europe and the US. Ultimately, sustained high prices will lead to demand destruction. But for now, consumers are simply paying more, not changing their driving habits. In the medium term, eye-popping oil prices will spur more electric vehicle sales and could reverse some of the mistakes made in recent years with storage capacity. Ultimately, moving away from fossil fuels will be a decades-long transition. Until then, fossil fuels are still king.
Based on the above news, it can be seen that with the relaxation of the epidemic blockade measures in Asia and the arrival of the driving season in Europe and the United States, the demand for oil is expected to increase, but Saudi Arabia and the United Arab Emirates are only willing to increase production slightly. High oil prices may spur electric vehicle sales, but it's still a long-term process, come on fossil fuels. In this way, short-term oil prices are still easy to rise and hard to fall.
(Daily chart of Brent crude oil main contract)
GMT+8 At 9:29 on June 9, the price of the main Brent crude oil contract was reported at $124.08 per barrel.
According to market analyst Stuart Burns, there are many reasons for the rise in natural gas prices. Lack of natural gas storage is one factor. Another reason is Europe's overreliance on formerly cheap Russian oil and gas. Compounding the problem, politicians are eager to shut down nuclear and fossil fuel production. This applies not only to crude oil and natural gas, but also to refined products. These factors combine to create a perfect storm that has driven gasoline prices to all-time highs.
In fact, gasoline prices have continued to soar even as crude oil prices are significantly lower than they have been in the past 10 years. As the FT observed, Brent reached $123 a barrel last week, well below its 2008 peak of $147.50. Record diesel and gasoline prices have a lot to do with the increase in refining premiums. Tight refinery capacity is the main reason behind the surge in these oil prices during the maintenance season. This seems to suggest that these premiums will ease once refineries return to full production, but that's no guarantee. Consumption in Asia, for example, has been severely restricted due to widespread lockdowns this year. However, demand in the U.S. and Europe will pick up as consumption picks up in the summer as coronavirus lockdowns ease.
Reports last week that Saudi Arabia and the United Arab Emirates will increase crude production ahead of the current September assessment date pushed prices slightly lower. Until news comes that July and August production may only increase by 250,000 barrels per day. Of course, this extra supply is useful, but not enough to shake up the market . Officially, the Saudis are reluctant to increase production further because they want to keep some spare capacity in case oil prices rise further. Basically, Russia claims they need to be "prepared" for a potential increase in demand, or a further reduction in Russian supply, or both.
Many experts believe that the risk of higher crude oil prices is greater. For now, the gradual recovery of refining capacity is being offset by increased demand from Asia and the upcoming driving season in Europe and the US. Ultimately, sustained high prices will lead to demand destruction. But for now, consumers are simply paying more, not changing their driving habits. In the medium term, eye-popping oil prices will spur more electric vehicle sales and could reverse some of the mistakes made in recent years with storage capacity. Ultimately, moving away from fossil fuels will be a decades-long transition. Until then, fossil fuels are still king.
Based on the above news, it can be seen that with the relaxation of the epidemic blockade measures in Asia and the arrival of the driving season in Europe and the United States, the demand for oil is expected to increase, but Saudi Arabia and the United Arab Emirates are only willing to increase production slightly. High oil prices may spur electric vehicle sales, but it's still a long-term process, come on fossil fuels. In this way, short-term oil prices are still easy to rise and hard to fall.
(Daily chart of Brent crude oil main contract)
GMT+8 At 9:29 on June 9, the price of the main Brent crude oil contract was reported at $124.08 per barrel.
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